Early retirement is the dream of many a weary commuter. Have you ever imagined retiring early to travel, build a fabulous garden, or spend more time with loved ones? Would you know where to begin?
Where to start
A strong first step is to book an appointment with an independent financial advisor (IFA) to ensure that any retirement plan you create is solid. A good IFA will use up-to-date IFA back office software to track the financial products on the market. If you receive professional advice from an IFA before buying any financial products, you can seek compensation if you receive bad advice; if you make these decisions alone and get them wrong, you could stand to lose your money.
How soon can you receive a pension?
Pension freedoms were introduced into UK law in 2015, allowing people to access some types of pension pot earlier. If you have a defined contribution pension rather than a final salary pension, you could start to receive pension payments when you are 55. This can be a boon for early retirement, but it is important to seek advice – retiring early only to run out of money is nobody’s dream! State pensions are not available for those under 66, with the age limit rising in future years. You can check your state pension age on the government website.
Debts and investments
A good independent financial advisor can help you to prepare for early retirement by making sure you have the right financial products to keep you afloat. Using software from a provider such as https://www.intelliflo.com/financial-adviser-software will enable your advisor to find the best possible products for you. Moving loans or mortgages to cheaper rates or savings to better investment accounts can help you to clear your debts and get a better rate of return on your hard-earned cash.
Once you have achieved early retirement, what if you get bored or run out of money? Can you just go back to work? Perhaps, but watch out for the money purchase annual allowance. If you access your pension early, the amount you can pay into your pension decreases to around 10 per cent of your usual allowance; for example, you could only pay £4,000 into your pension rather than £40,000 or 100 per cent of your income in the current tax year.